Why are N, Sony, MS compared by units sold?

In the business news, I see again a report that Sony is taking a drubbing as Nintendo sold 5.5M units and Sony sold 1.5M units. And the intended conclusion is that N kills Sony with sales of 4M more.

This seems so wrongly simplistic to be useless.

First, Sony's hardware costs up to 2x as much ($500 v $250 for the console). So, for gross revenue Sony is much closer than the unit sales suggest. In my estimated, but realistic example, N sold $1375M and Sony sold $750M in hardware. Sony's still losing, but it's a 2x difference rather than almost 4x.

But even that means nothing. If the actual net revenue (profit) for one or the other is much larger per unit (regardless of unit cost), it would dramatically swing the comparison.

And even then, number of consoles doesn't necessarily matter, since it really comes down to how many games the console owners buy. If N seels 4x the consoles, but the owners never buy games, Sony could still "win" financially with high game sales.

I don't know who's "winning" -- it might still be N over Sony, just as the units sales indicate. But it seems that would be a conclusion despite the numbers, not because units sales are per se a good metric.

And so, why do even sensible business reporters use these numbers for analysis? They seem worthless without context. Or am I making this too complicated and all that matters is units sold? (which would be news to all the wealthy businesses in upscale niches making large profits from higher-margin, lower-volume sales)

Re: Why are N, Sony, MS compared by units sold?

News outlets are not engaged in providing facts. They are interested in promoting hysteria and selling commercials.

All the gaming consoles are big sucking holes in the profit line, because all of them are sold at a loss in expectation that game sales will more than make the difference.

pssst, hey kid, try this....the pusher hisses.

N is getting lots of sales on the Wii, I'd guessThey've really found something different to sell. . Too bad that there are none available anywhere... In four years it will be part of the background noise.

yup, I beleive in the long haul....

Re: Why are N, Sony, MS compared by units sold?

Marketshare and corporate finance are two separate entities, as such they need to be treated in different ways.
The first is indicative of what revenue which can be expected, seeing how gamers are pretty homogenous as a group (i e buying around the same amount of software percentage wise) a bigger marketshare means more revenue.

The second could go either way regardless of marketshare, say that manufacturer A sell their consoles below cost and manufacturer B sell theirs at a profit.
This would result in A losing more money the bigger their marketshare is, while B would make a profit no matter how small their share is.
But as previously stated, a bigger marketshare would also mean more revenue due to more software sales, so A could in reality lose money while gaining more...

With all 3 manufacturers being producers/distributors of software this could indicate that they are willing to take a hit on hardware and attempt to regain that and possibly more from software/licensing.
Current state of affairs (as is being rumoured) on this front is that Sony is still subsidizing their hardware, Microsoft have recently started to make profit on the 360 and Nintendo has been making profit since day one.

All this would in reality mean that Nintendo is pulling of a trifecta, making a profit on both hardware and software and also selling more games than their competitors.
So in order for Sony to surpass Nintendo (assuming the current situation stands), they would need to sell software at a much higher ratio then Nintendo.
Which in turn could be impossible as some Wii-games have already far surpassed all reasonable expectations of a PS3-game sale, no game on any console would sell to more then 100% of the installed base...

So I guess that would be the low down on the situation, or at least something like that.
Though everything could change should sales increase/decrease on hardware or software.
I myself is starting to get a bit dizzy thinking about this so I guess it's better to stop posting, the post is way to long as it is anyway.

Re: Why are N, Sony, MS compared by units sold?

I guess the overall profit of "Sony Corporation" went down in "Q1", but their game sector is doing much better. PS3 is doing good and PSP is doing extremely good in Japan.

Sony Q1 Profits Halved on Electronics, Cell Phones - Yahoo! News

"Sony's games sector saw 17 percent higher sales and an operating profit of 165;5 billion on the back of strong PlayStation 3 shipments. During the quarter Sony shipped 1.6 million of the consoles, which is more than double that of the same quarter last year. Additionally PlayStation Portable shipments jumped 75 percent to 3.7 million."

Technology News: Gaming: Sony Q1 Profit Plunges Nearly 50 Percent

"Sales of the PS3 and PSP helped buoy the games unit, which saw sales increase by 16.8 percent to $2.2 billion. The unit showed $51 million in operating income, Oneda said."

While PS3 and PSP are doing pretty good, I guess PS2 is slowing down..

"Sony reported that 22.8 million PS3 games sold in the first quarter, an increase of 18.1 million games, year-over-year. Nearly 12 million PSP games sold during the same period, an increase of 2 million games. And 19.3 million PS2 games sold in the first quarter, down 11.8 million, year-over-year."

Re: Why are N, Sony, MS compared by units sold?

Good observation, in reporting on marketshare vs. finance. Except that the assumption that gamers are all alike and buy the same may not be correct: Do the Wii's "casual" gamers buy at the same rate as traditional "core" gamers? Again, units sold may have little connection to finance.

In the extreme case, marketshare can lead to the distrastrous financial results, seen recently by Olevia LCD TVs. They were sold at low prices to capture marketshare. So low that they couldn't make it up in volume and went bankrupt.

I agree that N may well be beating the others in every true measure. But the reported numbers seem to say little about that.

I expect better from the business news, who often get into financial esoterics in other matters.

Re: Why are N, Sony, MS compared by units sold?

I love my Wii and e.g. those Mario-games, but now when PS3 is in full swing with games and Xbox 360 has already plenty of games, I´m a bit worried when it comes to Wii-games. I mean it´s very quiet on that front and they can´t offer that much on the graphic front either (vs. PS3/Xbox 360, which are using HD)... So how long the wireless controllers, Wii Fit, Mario games and cheaper price can make that difference in the gaming markets? Just wondering..

Re: Why are N, Sony, MS compared by units sold?

The reason they report numbers of consoles sold is because it's a popularity contest.

BTW, Wiis are not so hard to get anymore. A shipment comes in every month or two, at which time most of the local stores have them in stock for a week or two.

I was in Costco yesterday and they had a whole bunch. They changed their bundle, too -- the price went from $350 to $370 and they replaced Super Mario Galaxy with Super Smash Bros. and a Gamecube controller. (It still includes Wii Play and an extra nunchuk.)

Re: Why are N, Sony, MS compared by units sold?

On occasion, when the monthly sales numbers are released each of the big 3 likes to tout it's own amazing success. Microsoft will say how much money it made, Nintendo will give raw unit sales, and Sony will talk about it's increase in sales from the last month/year. It's spin for all 3 companies. What's cool is when videogame websites cover all 3 versions of the numbers at the same time to show which ones are spinning the worst.

Also, it's important to consider the cost of whatever is being sold, in terms of profit versus cost. The 360 was being sold at a loss up until this year, I think, and it was a big loss. Sony hasn't really made money on the PS3 in terms of hardware. Nintendo, OTOH, has been making money off the console itself, at only $250 per unit, in addition to software sales. This changes the way the numbers read and adds more importance to things like software attach rates.